Ultrapar Participações S.A. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Extraordinary Tax Credits: Ipiranga recognized BRL 238 million in extraordinary tax credits.
• Fight Against Illegal Practices: Progress in fighting illegal fuel practices, with Carbono Oculto Operation as a milestone.
• Leverage Reduction: Leverage reduced to 1.7x from 1.9x, with strong cash generation and EBITDA growth.
• Expansions and Acquisitions: Completed expansion of Ultracargo terminal in Santos, sold Hidrovias Cabotage operation for BRL 715 million, signed agreement to acquire 37.5% stake in Virtu for LNG logistics, and received CADE approval for LPG terminal in Pecém.
• Ultra Day 2025: Presentation available on Investor Relations website.

Segment Performance

• Ipiranga: Adjusted EBITDA was BRL 1.85 billion, 12% higher year-over-year. Volumes sold were 1% higher year-over-year due to increase in Otto cycle gasoline. Ended the quarter with 5,812 substations, added 70 and closed 84. Cash generation was BRL 1.453 billion, more than twice the prior year. Revenue contribution from Ipiranga is a significant portion.
• Ultragaz: LPG volume sold was 6% lower year-over-year. Recurring adjusted EBITDA totaled BRL 463 million, a 3% increase year-over-year. Revenue contribution from Ultragaz is part of the overall segments.
• Ultracargo: Average installed capacity was 3% higher year-over-year, but cubic meters sold were 12% lower year-over-year. Net revenue was BRL 243 million, a 9% decrease year-over-year. Adjusted EBITDA was BRL 134 million, 20% below prior year. Revenue contribution from Ultracargo is a part of the segments.
• Hidrovias: Volume handled grew 30% year-over-year. Adjusted EBITDA was BRL 332 million, recurring EBITDA was BRL 361 million, more than twice the prior year. Revenue contribution from Hidrovias is a key segment.

Guidance

• Ipiranga: Expect continued market recovery in Q4 with volume growth and profitability similar to Q3.
• Ultragaz: Expect EBITDA higher than Q3 in Q4.
• Ultracargo: Expect recovery in EBITDA compared to Q3.
• Hidrovias: Expect EBITDA similar to Q4 2022, considering seasonality effects.

Risks

• Illegal Practices: Ongoing fight against illegal fuel practices remains a risk, with potential impact on performance.
• Economic Slowdown: Ultragaz volumes affected by economic slowdown and lower demand from industries.
• Seasonality: Hidrovias navigability affected by seasonality in Q4.

Q: First question focused on Ipiranga's sequential improvement, trend for Q4, and strategy to recover market share vs optimize margins.

A: Leonardo Linden stated hidden carbon operation was positive but fight against illegality continues, volume picking up, margin recovery predictable with internal efficiencies.

Q: Second question about capital allocation and future investments.

A: Rodrigo Pizzinatto said looking for companies/projects to create value, else increase dividend sharing.

Q: Question about cash generation, deleveraging, and future dividends.

A: Rodrigo Pizzinatto mentioned strong cash generation, possibility of anticipating dividends in Q4.

Q: Question about Ipiranga's inventory variation, CapEx in Q3 and Q4.

A: Rodrigo Pizzinatto said no specific inventory loss/gain mention, CapEx for year likely below plan. Alexandre Palhares spoke about sustainable working capital efficiencies.

Q: Question about Ultragaz's new reference prices and reseller compliance.

A: Tabajara Bertelli spoke about Gás do Povo program, reseller compliance, and positive outlook on volumes and prices.

Q: Question about Ultragaz's LPG regulatory review.

A: Tabajara Bertelli said regulatory review ongoing, expected to be completed in first half of 2026.

Q: Question about Ipiranga's Q4 profitability, inventory, and offenders.

A: Leonardo Linden said Q4 guidance based on market dynamics, offenders still exist but progress made in fighting irregularities.